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WTO COOL ruling favors Canada and Mexico

The World Trade Organization (WTO) ruled last week (Oct. 20) that the latest U.S. mandatory Country-of-Origin Labeling (COOL) revision is discriminatory against food products originating in Canada and Mexico, and the rule revision provides an unfair marketing advantage to U.S. beef, pork and chicken products.

The U.S. Department of Agriculture issued the revised rule last year after WTO said an earlier version of COOL was unfair to the Canadian and Mexican livestock industry because the rule raises producer costs and makes labeling requirements that further burden imported livestock to compete with their U.S. counterparts.

But Canada and Mexico appealed to the WTO after the revision was filed claiming the new revised rule made requirements more stringent and burdensome for Canadian and Mexican exporters than the original COOL rule. The recent WTO ruling represents the result of the Canadian-Mexican appeal and, if left unchallenged, will require further USDA amendments to Country-of-Labeling requirements.

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The World Trade Organization’s appeals panel ruled that some COOL requirements in the latest revision created a "detrimental impact on the competitive opportunities of imported livestock in the U.S. market because it necessitates increased segregation of meat and livestock according to origin; entails a higher record-keeping burden; and increases the original COOL measure’s incentive to choose domestic over imported livestock."

Tariff threats

Both Mexican and Canadian trade officials threatened to place tariffs on U.S. imports last year. Canada’s list of targeted products includes live cattle, live hogs, and meat products; fresh fruits, grains, pasta, bread and other pastries; wine and ketchup; certain metals and jewelry; mattresses and more. Mexico was preparing a similar list but officials have not yet released it.

The revised Country-of- Origin Labeling rule went into effect in Nov., 2013, and required that labels for meat originating from imports were to be clearly marked and must identify where animals were born, raised and slaughtered.

U.S Trade representatives say they are "disappointed" with the latest WTO ruling; they officially have 60 days to file an appeal. As one trade official put it, "our options are open."

While U.S. Country-of-Origin Labeling is strongly supported domestically by some consumer groups and a number of lawmakers, not everyone is pleased with new labeling requirements. Farmers and ranchers are divided over the issue. They say the new rule will cost them upwards of $500 million to conform to new requirements and if tariffs are imposed by Canada and Mexico it could have a devastating effect on U.S. trade, a development that would be bad for producers and consumers on both sides of the border.

Canada represented the largest market for U.S. goods in 2013, and Mexico was a small step behind. More than $500 billion in U.S. exports went to our nearest neighbors last year and that number has been rising rapidly for several years running. Many fear new tariff requirements on U.S. exports would greatly reduce export volume to Canada and Mexico and would significantly affect U.S. production.

Following the ruling last week, Canadian officials say they will be closely monitoring the U.S. reaction to the WTO ruling. They warned again that if the U.S. does not conform to the ruling by making changes to the labeling requirements they may move soon toward trade tariffs.

"We will continue to fully assert our rights to achieve a fair resolution to our concern, including seeking authorization to implement retaliatory measures on U.S. agricultural and nonagricultural products if and as necessary," said Canadian agricultural minister Gerry Ritz. In a joint statement issued last week by Ritz and Canadian Trade Minister Ed Fast, Canada's position is that COOL labeling requirements are "blatantly protectionist."

U.S. officials say they will consider their options carefully before responding to the WTO ruling but say for now Country-of-Origin Labeling rules will remain the same.

Consumer groups and many farmers in the U.S. say consumers have the right to be protected by labeling laws that require place of origin labeling for all food products.

U.S. trade officials have until late December to file an appeal with the World Trade Organization over this latest ruling.